How to Invest Like Warren Buffet With ETFs

Sweta Killa Published on March 05, 2019

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The U.S. bull market is getting stronger and will turn 10 at the end of this week. After a bumpy ride last year, the optimism over the U.S.-China trade deal, the Fed’s patient stance toward rate hikes, oil price rebound and higher consumer confidence bode well for the stock market (read: S&P 500 Back to Above 2,800: SPY ETF Versus IVV).

As a result, investors will continue to pour money into riskier assets such as equities. While there are a number of choices available in the space across various asset classes, sectors and companies, it is always difficult to choose the best ones that would provide higher returns. Fortunately, with the release of fourth-quarter 13F filings, investors have started mulling over the top bets of the legendary billionaire and philanthropist – Warren Buffett.

Warren Buffett’s equity stock portfolio rose to $172.75 billion at the end of 2018 from $170.54 billion at the end of 2017 despite the fact that the S&P 500 and Dow Jones logged in their biggest annual losses last year since 2008.

Below we have highlighted four such areas and their related ETFs that could be worthwhile for investors this year (see: all the ETF Categories here):

Apple ETFs

The “Oracle of Ohama” has the largest holding in the tech giant Apple (AAPL - Free Report) , which has been dealing with challenges in recent quarters due to slowing iPhone sales, with investments of more than $43 billion at the end of 2018. The most popular technology ETFs — Select Sector SPDR Technology ETF (XLK), iShares Dow Jones US Technology ETF (IYW), Vanguard Information Technology ETF (VGT) and MSCI Information Technology Index ETF (FTEC) — have Apple as their top or the second-highest holding with a double-digit allocation. All these funds have a Zacks ETF Rank #1 (Strong Buy) (read: Apple Rallies on Earnings Beat: Top-Ranked Tech ETFs to Buy).

Bank ETFs

The latest 13F filing reveals that the Warren Buffett increased his bet on banking stocks once again after doing so in the third quarter of 2018, suggesting that he is bullish on the prospects of most banks than ever. Though the billionaire trimmed his stake in Wells Fargo (WFC - Free Report) , he added stakes in Bank of America (BAC - Free Report) , U.S. Bancorp (USB - Free Report) , JPMorgan Chase (JPM - Free Report) and super-regional PNC Financial (PNC - Free Report) . The move has made the billionaire a major shareholder in four of the five largest U.S. banks. In order to capitalize this move, investors could consider bank ETFs like SPDR S&P Regional Banking ETF (KRE), Invesco KBW Regional Banking ETF (KBWR), SPDR S&P Bank ETF (KBE) and Invesco KBW Bank ETF (KBWB). KBWR has a Zacks ETF Rank #2 (Buy) while the other three have a Zacks ETF Rank #3 (Hold) (read: Invest Like Warren Buffet With These Bank ETFs).

Consumer ETFs

Warren Buffett also has a portfolio in a bunch of consumer stocks like Kraft Heinz (KHC), The Coca-Cola (KO - Free Report) , Mondelez International (MDLZ) and Procter & Gamble (PG - Free Report) . However, the billionaire investor felt the pain of the slump in the two of these stocks last month as Coca-Cola shares slumped amid a downbeat profit forecast, while Kraft Heinz fell to a record low after announcing a $15.4 billion write-down of the goodwill value of assets including the Kraft and Oscar Mayer trademarks. The beaten down prices seems to be an attractive point for those seeking to follow Warren Buffett but with lower risk.

For them, Consumer Staples Select Sector SPDR Fund (XLP), Vanguard Consumer Staples ETF (VDC) and iShares Evolved U.S. Consumer Staples ETF (IECS) could be good picks. All these funds have substantial exposure in the four consumer stocks. XLP and VDC have a Zacks ETF Rank #3.

Airline ETFs

Warren Buffett also owns some major airline stocks like American Airlines Group (AAL - Free Report) , Delta Air Lines (DAL - Free Report) , United Continental Holdings (UAL - Free Report) and Southwest Airlines (LUV - Free Report) . The bunch of these stocks could be found in the only pure paly airline ETF — U.S. Global Jets ETF (JETS). The product has a Zacks ETF Rank #3 (read: Airlines ETF Riding High on Q4 Earnings).

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